The Housing Chronicles Blog: My review of "Real Estate and the Financial Crisis" now online

Tuesday, June 9, 2009

My review of "Real Estate and the Financial Crisis" now online

My review of the book "Real Estate and the Financial Crisis: How Turmoil in the Capital Markets is Restructuring Real Estate Finance"by economist and real estate writer Anthony Downs is now online at Inman News.

For now, here's an excerpt from the review:

As a senior fellow at the well-respected Brookings Institution, a Washington, D.C., think tank with decades spent studying real estate markets, Downs didn't have to rely much on outside experts: in fact, he said that most of his research was conducted on the Internet. He cautions, though, that for the research novice it's often difficult to distinguish between fact and fiction on the World Wide (and wild) Web.

Downs, with 26 other books and more than 500 articles to his credit, has taken readers down similar paths before, including 2007's "Niagara of Capital: How Global Capital Has Transformed Housing and Real Estate Markets" as well as "An Economic Theory of Democracy" (1957) and "Inside Bureaucracy" (1967), the latter two of which are considered academic classics.

Consequently, although the book is designed somewhat like a textbook in format -- including nine chapters and various subsections -- the author's narrative gift for telling stories about complicated economic and political issues makes his latest release easy to both skim and read in greater detail (you may find yourself jotting down notes in the margins). He doesn't "dumb down" the subject matter like a populist real estate book with an exclamation point in the title might do...

Towards the end of the book, Downs gets out his economic crystal ball to peer ahead into the future, and what he sees still remains a bit murky: a credit crunch lasting another one to three years, the real estate capital market gradually improving as investors grow impatient with other asset classes, but a timeline that will depend greatly on how the broader stock market fares in comparison.

Within that context, the author assigns probabilities to four potential future scenarios, including a weak U.S. recession and a speedy recovery by the end of 2009 (15 percent chance); a bad U.S. recession in 2009 and tight credit through 2010 (65 percent); a more serious recession lasting throughout 2010 resulting in a collapse of the dollar and higher interest rates (8 percent); and a recession lasting two to three years including massive federal spending, ongoing inflationary pressures and high interest rates (12 percent).

So what is Downs' latest update from my interview with him? A 65 percent chance of a two-year recession (lasting into 2010), and new housing production levels lower in 2009 than in 2008.

Let's just hope that it's this scenario that turns out to be true and not the one which leads to rampant inflation, high interest rates and a dollar collapse.

I also interviewed author Downs for my show at BlogTalkRadio, which you can either listen to here or by clicking on the audio player on the right margin of this blog.

Want to buy this book? Click here or on the link below.

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